NEW BULLISH Plays

The Dow Chemical Co. - DOW - close: 50.68 change: +0.90

Stop Loss: 47.90
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 9.5 million
New Positions: Yes, see below

Company Description

Why We Like It:
DOW is in the basic materials sector. The company supplies chemical products as raw materials. As Wall Street searches for returns and yield DOW will likely continue to show up on their radar screen.

The company has been doing a good jog on maintaining cost controls and returning capital to shareholders. The Q1 2014 earnings report showed net profits surged +75% from a year ago. The first quarter was their sixth consecutive quarter of year-over-year earnings growth.

Dow has raised their dividend by 15% and now sports a 3.0% yield. They plan to complete a $4.5 billion stock buyback program in 2014.

In spite of higher feedstock and energy costs DOW still managed to see margins grow. They expect 2014 to see this margin growth gain further momentum.

Wall Street has been upgrading the stock and raising earnings forecasts.

Shares of DOW are in a long-term up trend (see weekly chart below). Yet the last couple of months have seen shares consolidating gains in a sideways move near $50. This consolidation looks like it's about over. DOW is poised for a breakout higher.

We are suggesting a trigger to open bullish positions at $51.25.

Trigger @ $51.25

Suggested Position: buy DOW stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Sep $50 call (DOW140920C50) current ask $2.57

Option Format: symbol-year-month-day-call-strike

Annotated chart:

Weekly chart:



NEW BEARISH Plays

The Fresh Market, Inc. - TFM - close: 29.15 change: +0.45

Stop Loss: 31.55
Target(s): To Be Determined
Current Gain/Loss: unopened

Entry on May -- at $--.--
Listed on May 24, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 995 million
New Positions: Yes, see below

Company Description

Why We Like It:
TFM is in the services sector. The company is considered a specialty retailer in the grocery industry. It's been a rocky, painful road for TFM investors as the stock has produced a roller coaster ride lower from its 2012 highs. This past week saw TFM shares fall to new all-time lows and breakdown below round-number support at the $30.00 level. Shares did pop more than +10% higher on Friday morning as investors reacted to the company's earnings report out Thursday night.

TFM reported Q1 earnings of 43 cents a share. That was down -6.5% from a year ago but was in-line with analysts' estimates. Traders were likely expecting a miss and when TFM met estimates it sparked some short covering. The stock does have a high amount of short interest. Unfortunately for the bulls the rally didn't last and TFM's +10% gains faded to just +1.5% on Friday.

TFM's Q1 revenues did come in better than expected and management reaffirmed their 2014 guidance (near the low end of Wall Street's estimates). Investors were not happy with the big drop in TFM's margins. Q1 gross margins fell from 35.3% a year ago to 34.4%.

TFM is facing the same pressures that its larger rival Whole Foods Market (WFM) is facing. More and more grocers are getting into the fresh and organic food market. Sprouts Farmers Market, Kroger, Wal-mart, and regional competitors like HEB and Trader Joe's are all hopping on the natural food bandwagon. All this competition is going to continue to squeeze TFM's margins.

At least one analyst firm thinks TFM's 2014 outlook is too optimistic and does not take into account tougher competition and the impact that rising food inflation will have on margins.

The trend is down but this could be a volatile short to play. There are already a lot of bears in the name. The most recent data listed short interest at 19% of the small 44.3 million share float. That raises the risk of a short squeeze. TFM can see these sharp three or four day rallies that lift shares more than 10% before they run out of steam again.

Tonight we are suggesting a trigger to open bearish positions at $28.45. That's just below Thursday's all-time low. If triggered we'll use a stop loss at $31.55, above Friday's high. We're not setting an exit target tonight. It's worth noting that the point & figure chart is bearish and forecasting at $20.00 target.

Consider using small positions or use the put option to limit your risk. I want to remind you that this could be a volatile trade.

Trigger @ $28.45 *small positions*

Suggested Position: short TFM stock @ (trigger)

- (or for more adventurous traders, try this option) -

Buy the Sep $30 PUT (TFM140920P30) current ask $3.00

Option Format: symbol-year-month-day-call-strike

Annotated chart:

Weekly chart: